Ericsson's quarterly results beat forecast as 5G lifts off

STOCKHOLM (Reuters) – Sweden’s Ericsson on Friday reported fourth-quarter core earnings ahead of market estimates on the back of strong sales of 5G equipment while the company continued to benefit from the ban of China’s Huawei in several countries.

FILE PHOTO: The Ericsson logo is seen at the Ericsson’s headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg

The upbeat results capped an eventful year that also saw increased deployment of 4G telecom networks as operators added capacity due to the coronavirus pandemic apart from quickening the roll-out of 5G networks.

The company’s quarterly adjusted operating earnings rose to 11 billion Swedish crowns ($1.32 billion) from 6.5 billion crowns a year earlier, beating the mean forecast of 8.58 billion crowns, according to Refinitiv estimates.

Sales at its Networks unit rose 20% with gross margin climbing to 43.5% from 41.1%.

“This reflects continued high activity levels in North America and North East Asia, and also in Europe where we further increased the market share,” Chief Executive Börje Ekholm said in a statement.

North East Asia includes China, where Ericsson, unlike Nordic rival Nokia, got 5G radio equipment contracts from China’s three largest telecom operators.

Ericsson has been vocal about the exclusion of the Chinese company from Sweden and it was earlier reported that Ekholm had threatened to leave Sweden if authorities supported the ban on Huawei and ZTE.

Chief Financial Officer Carl Mellander denied that there was any talk of leaving Sweden.

“I don’t think that’s exactly what Borje meant that we would be moving out … we will remain a Swedish domiciled company,” Mellander told Reuters.

Ericsson also highlighted that the Swedish telecom regulator’s decision to exclude Chinese vendors from 5G networks may create exposure for its operations in China.

“We haven’t seen any material impact in China but Borje wanted to highlight the risk,” Mellander said.

Total revenue rose 5% to 69.6 billion crowns, beating estimates of 68.35 billion crowns.

Gross margin surged 40.6% in the quarter from 36.8% in the year-ago period.

($1 = 8.3643 Swedish crowns)

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